Full text of District Notices (Federal Reserve Bank of Dallas) : Regulation D -- Reserve Requirements Depository Institutions), Circular No. 86-49

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Federal Reserve Bank
OF DALLAS
WILLIAM H. WALLACE

DALLAS, TEXAS 75222

FIRST VICE PRESID ENT

May 21, 1986
Circular 86-49

TO:

All depository institutions in the
Eleventh Federal Reserve District

SUBJECT
Proposed amendments to Regulation D (Reserve Requirements of
Depository In stitu tio n s)
DETAILS

The Board of Governors of the Federal Reserve System has issued, for
public comment, proposed amendments to Regulation D, Reserve Requirements of
Depository Institutions.
The proposed amendments redefine the terms "deposit" and "affiliate".
The Board is also seeking comment on suggested amendments to clarify how
maturities of deposits should be measured for the purposes of Regulation D.
Comments on the proposed amendments should be directed to the Board
of Governors no later than July 11, 1986.
ATTACHMENTS

The Board's press release and the related Federal Register document
are attached.
MORE INFORMATION

For further information regarding Regulation D, please contact Johnny
L. Johnson at (214) 651-6641 or John Rogers at (214) 651-6228.
Sincerely yours

For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are
encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800)
527-9200 (interstate).

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERAL RESERVE press release

For Immediate release

May 1, 1986

The Federal Reserve Board today issued for public comment a proposal
to amend the definition of the term deposit 1n I t s Regulation D--Reserve
Requirements of Depository In s titu tio n s.
The proposal c l a r i f i e s th a t sales of assets by depository In s titu tio n s,
or similar transactions, give rise to deposits for reserve requirement purposes
I f the In s titu tio n remains lia b le for losses on the assets.

The proposal also

c l a r i f i e s th at conditional obligations of depository In s titu tio n s may give rise to
c^posits i f in s titu tio n s Issue the obligations to support, directly or indirectly,
l i a b i l i t i e s of a f f i l i a t e s .
Comment 1s requested by July 11, 1986.
Under the proposal, the definition of deposit would be amended to include
e x p lic itly l i a b i l i t i e s arising from sales of assets when the depository Institution
Issues or undertakes a l i a b i l i t y supporting the assets sold, directly or Indirectly.
In general, the full amount of the proceeds would be a deposit whether all or a
portion of the assets sold are guaranteed.

However, the proceeds would not be

considered a deposit 1f the depository i n s t i t u t i o n ’s l i a b i l i t y represents an agree­
ment to share in the risk of loss on each asset sold where th at share is limited to
less than 75 percent of losses realized.
The proposed amendments to the regulation would also affect the treatment
of a f f i l i a t e obligations.

Under the proposal, the definition of deposit would

change the current rule by excluding certain a f f i l i a t e obligations.
(more)

This exclusion

would occur when the proceeds were used to purchase assets from a depository
in s titu tio n and the i n s titu tio n did not retain an i n te r e s t in or l i a b i l i t y for the
assets sold.

However, an a f f i l i a t e ' s obligation would be considered a deposit i f

the depository i n s titu tio n undertakes a l i a b i l i t y to support, directly or
in d irectly , the a f f i l i a t e ' s obligation even i f the depository in stitu tio n does not
receive the proceeds from the obligation.

Further, the Board's proposal would

amend the definition of a f f i l i a t e in Regulation D to cover any organization that a
depository i n s titu tio n effectively manages or controls even i f i t does not formally
own or control the organization.
Finally, the proposal seeks comment on suggested amendments to cla rify
how maturities are measured for purposes of Regulation D.
The Board's notice is attached.

-

Attachment

0

-

FEDERAL RESERVE SYSTEM
12 CFR Part 204
(REGULATION D? Docket No. R-0571)
Definition of Deposit

AGENCY:

Board of Governors of the Federal Reserve System.

ACTION:

Request for public comment on proposed rules.

SUMMARY:

Pursuant

to

Federal Reserve Act,

its

authority

as amended,

under

the Board

proposed amendments to 12 CFR Part 204
Requirements
several
the

of

Depository

requests

for

reservability

depository

the assets
Board
such

certain

institution

After

the

comment on

(Regulation D —

these
give

types

of

Reserve

considering

transactions,

by depository

retains

sold and certain

transactions

of

interpretations of Regulation D regarding
of

is proposing

19

requests

Institutions).

particularly sales of assets
the

section

institutions

conditional

transactions with

amendments

in order

where

liability

for

affiliates,

the

to clarify when

rise

to deposits

for

purposes

of

the

proposed

amendments,

the

reservability

r egul a t i o n .
Under

the

of

such transactions generally would depend upon the nature of the
liability

of

the

depository

Board's Regulation D provides
any

liability of

note,

a depository

acknowledgment

similar obligation
bonds,

that

funds.

The

rule

is

issued

or

regulation

certain

of

these

involving

securities

and

excludes

that the

"deposit"

term

institution

advance,

on

bankers'

undertaken

currently

federal

as

any

the
includes

promissory

acceptance,

most

government

interbank

the definition

a means

excludes

liabilities,

certain
from

Currently,

or

(written or o r a l ) , including mortgage-backed

agreements

also

of

institution.

from

this

notably
and

"deposit"

general

repurchase

federal

obligations.
of

of obtaining

The

agency

regulation

an obligation

2-

-

that

represents

liability.
which

a

Under

conditional,

contingent

the current regulation,

or

e n d o r s e r ’s

most asset

sales

in

the depository institution retains some risk of loss are

considered deposits, but the regulation
technical
clarify

points.

the

The

proposal

application

of

is

reserve

is not clear on several

intended

primarily

requirements

to

to

these

and

related situations.
The proposal would
specifically

to

institution

include

issues

or

amend

sales

the definition

of

assets

undertakes

a

where

of

"deposit"

the depository

liability

supporting

the

assets sold or retains a reversionary interest in these assets,
regardless of whether

the liability or interest

unconditional or contingent or whether
or

a portion

depository

of

the

assets

institution's

shared with

sold.

is conditional,

the liability covers all

Transactions

in which

liability on any particular

the purchaser as the loss

is realized

than 75 percent of the loss would not give

rise

a deposit.

Generally,

institution's
guarantor

of

only
the

and

is

is less

is 75 percent

the transaction would give rise

transactions

liability

assets

asset

to a deposit.

Where the depository institution's share of risk
or more of losses realized,

the

is

sold

to

in which

the

reimburse

a

also would

to

depository
third-party

not give

rise

to

a

deposit under the proposal.
Under
affiliates
maintain

are

funds

the

current

reservable
to

a

when

itself.
from

if it had been

definition

affiliate's

of

obligation

deposit
are

used

without

depository

institution

retains

an

affiliate's

to

institution,

exclude

institution

the assets sold.

used

supply

provided

if
to

obligations
the

or
the

recourse?
no

if

the

institution

of

proceeds

purchase

assets

that

interest

The proposal would

obligation

of

have been considered a reservable

depository

for,

are

obligations

issued by the depository

The proposal would

the

they

depository

affiliate's obligation would
liability

regulation,

in,

is,
or

affiliates
of

an

from
if

a

the

liability

include as a deposit

depository

institution

-

undertakes

a liability,

3-

conditional

the affiliate's obligation even

if

or

otherwise,

to

the

depository

institution

does not receive the proceeds of the obligation.
the

proposal

include

would

any

amend

the

organization

definition

that

effectively manages or controls
formal

requisites

organization.
maturities

for

even

the

In addition,

"affiliate"

depository

ownership

Finally,

of deposits

a

of

not meet

control

proposal

seeks

should be measured

to

institution

if it does

or

support

of

to

for

the

the

clarify

how

the purposes

of

Regulation D.

DATE:

Comments

on

the

proposed

rule

should

be

submitted

no

later than July 11, 1986.

ADDRESS:
data,

Interested

views,

Wiles,

Board

of

invited

such

comments

N.W.,

to

the

to

of

the

Guard
N.W.

Avenue and C Street,

between

8:45 a.m.

business days.
No.

0571.

Submissions

Comments

may be

shall

inspected

Information

20551,
the

or

Eccles

Constitution
5:15 p.m.

on

in

Room

B-1122

between

except as provided

in

of the Board's Rules Regarding Availability of

(12 CFR 261.6(a)).

FOR FURTHER INFORMATION CONTACT:
Attorney

and

Reserve

to Regulation D Docket

8:45 a.m. and 5:15 p.m. on business days,
section 261.6(a)

in

(between

refer

to William W.

D.C.,

Station

Street,

written

Federal

Washington,

Building Courtyard on 20th
N.W.)

submit

the proposal

Governors

20th and C Streets,

to deliver

are

or comments concerning

Secretary,

System,

parties

(202/452-3778),

(202/452-3818),
(202/452-3022),

or

Patrick

Legal Division?
Division

John Harry Jorgenson,
J.

McDivitt,

Frederick

H. Jensen,

of

Research

and

Telecommunications Device

for

the Deaf

(TDD)

Hill or Dorothea Thompson

(202/452-3544)?

the Federal Reserve System, Washington,

Attorney
Economist

Statistics?
users,

Senior

for

Earnestine

Board of Governors of

D.C., 20551.

4-

-

SUPPLEMENTARY INFORMATION:
Act,

12 USC 461(b),

impose

reserve

institutions,
gives

the

Section 19(b)

provides

requirements
and

Board

section
the

of the Federal Reserve

the Board
on

with

deposits

the authority

held

by

Act,

12 USC

19(a)

of

that

authority

to

define

this authority,

the

term

institution
obtaining
of

461(a),

used

19.

in

Pursuant

to

the Board promulgated its current Regulation D.

Generally,
that

depository

terms

section 19 and to prevent evasions of section

to

the

Board's

current

"deposit” includes

that

are

funds.

issued

The

or

Regulation D provides

liabilities

of

undertaken

regulation

excludes

"deposit" certain obligations

a depository

as

a

from

means

of

the definition

that represent a conditional,

contingent, or endorser's liability.
Increasingly,
assets

by means

guarantees,

depository

institutions

of

transactions

under

be

required

repurchase,

may

to

which

are

the
or

selling

institution
retains

a

reversionary interest in, all or a portion of the assets
These

transactions

take

various

interest may be conditional

forms,

and

the

sold.

guarantee

or

(as in the case of a standby letter

of credit) or partial

(by limiting liability to some percentage

of

Under

the assets

proposal,

sold).

the

current

these transactions give rise

Regulation D and

to deposits

the

for reserve

requirement purposes because they are the functional equivalent
of

conventional

depository

deposits;

institution,

that
and

is,

the

they

raise

purchaser

funds

looks

for

to

the

the

depository institution as the source of creditworthiness.
The

Board

is

proposing

these

amendments

to

its

Regulation D in order

to clarify the types of transactions and

attendant

that

liabilities

give

rise

regulation.

The

proposal

provides

transaction

that

involves

a

reversionary

interest

of

a

to a deposit
that,

considered a deposit if the transaction
funds

for

the

depository

Thus,

a sale of assets

generally,

conditional

depository

institution

involving

under

liability

institution

the
a

or

will

be

is undertaken to obtain

other

than

a guarantee

by

fee

income.

a depository

5-

-

institution

in which

the

depository

institution

retains

the

risk of borrower default after

the asset is sold gives rise

a deposit.

the proposal,

would

In addition,

include

organizations

under

liabilities

issued

when

by

backed

depository institution.
of

the

depository

by

the term

affiliates

conditional

and

to

"deposit"
captive

obligations

of

a

These organizations may act as an arm

institution

which

would

otherwise

have

to

fund the lending activities with reservable liabilities.

deposits
proposed

The

proposal

also

are

measured

for

amendments

would

clarify

purposes

concerning

of

how

maturities

Regulation D.

asset

sales

and

of

These

other

transactions are discussed below.
Clarification of Current Definition of "Deposit"
1.

Subject

to

specified

treats any liability of a depository
a

means

of

deposit.
be

obtaining

Thus,

regarded

funds,

institution

other

than

a sale of assets with

as

a deposit.

"With

exceptions,

fee

Regulation D

undertaken

income,

as

recourse"

in

this

context

to repurchase or

to guarantee against loss all or a portion of the assets

interests

give

rise

that reversionary or

to a deposit.

Thus,

when

interest on

these assets

sold.

residual

the depository

institution sells a pool of assets but retains an
the principal or

a

recourse generally will

includes undertaking a conditional obligation

The proposal also would clarify

interest

that will

revert

the depository institution after a specified period

of

after

assets,

losses have been

deducted

deposit would be created.

from

as

the

reverting

in
to

time or
a

The proposal also would clarify that

obligations representing a conditional or endorser's liability,
other

than

deposit

fee

only

business,

where

such

transactions

income,

as

they
from

are

excluded

arise
the

in

from

the

collection

involving similar

the

definition

ordinary
of

course

checks.

of
of

Other

liabilities on the part of

depository institution may be considered to be deposits.

the

6-

-

The

Board

definition of

previously

"deposit"

created

an

for obligations

exception

arising

to

the

from the sales

with recourse of pools of one to four-family mortgages provided
that

the

recourse

interest
order
so

in

the

is limited

pool.

to encourage

that

easily

The

Board

than

created

a

this

ten

percent

exclusion

in

the growth of the secondary mortgage market

institutions
sell

to no more

their

holding

long-term

relatively

illiquid

mortgages
assets.

could

The

more

proposal

would not extend this exception to other types of assets.
In

the

case

of

a

guarantee

or

other

conditional

liability provided to support a pool of assets
value

of

the

assets

sold

generally

whether

applies

to all or only a portion of the loss.

case

of

a sale

of

or

a pool

other

be

deposit

the

the guarantee

would

sold,

the

considered

conditional

of automobile

full
a

liability

For example,
loans

where

in

the

depository institution guarantees or agrees to repurchase up to
ten

percent of

default,

all

considered

the

total

proceeds

of

the

sale

of

a deposit.

agreement with

value

However,

the purchaser

the pool
of

in the

the

pool

if a guarantee

to share

event

would

of

be

represents

in losses

arising

an

from

defaults on or claims against the individual assets sold as the
losses occur,

no

the purchaser of

deposit would result where the risk borne
the assets

by

is 25 percent or more of any loss

on individual assets in the pool of assets sold.
2.
affiliate,

Regulation D currently
as

defined

by

Regulation D,

as

treats an obligation of an

a deposit

of

the

depository institution to the extent that the proceeds are used
to supply

or

to maintain

depository

institution,

would

been

have

a

funds

(other

provided

deposit

if it

institution

regulation,

an affiliate's obligation

affiliate's

institution

purchase

is considered

of

capital)

affilite's

had been

depository

the

itself.

the

than

Thus,

issued

under

the

to

the

obligation
by

the

current

issued in connection with

assets from

a

depository

a deposit regardless of whether

the

-

assets are sold

7-

to the affiliate

with a depository

institution's

without

recourse or

guarantee or other

are sold

conditional

liability.
The Board proposes
an

affiliate's

liability

without recourse
does

not give

institution

to change

to provide

to an affiliate by

rise

to a deposit.

provides

a

the current
that

the

treatment of

sale

of

the depository

However,

guarantee

or

institution

if the

otherwise

assets

depository

assumes

a

conditional liability in connection with the sale of assets
the

affiliate,

either

to

support

obligations of the affiliate
affiliate's
deposit.

obligation

the

assets

or

issued to acquire

would

continue

to

be

to

to

support

the assets,
considered

the
a

If such a guarantee or other conditional liability is

issued by a nondepository affiliate of a depository institution
to

support

assets

institution
view

the

sold

to another

transaction

without

recourse

affiliate,

as

not

by

the

depository

the Board would

giving

rise

to

a

continue

deposit.

obligation of a depository institution's subsidiary
or more owned by the depository
be regarded

as a deposit,

institution)

regardless

to

An

(50 percent

would continue

of whether

the

to

proceeds

are passed to the depository institution.
The
obligation

proposal

is

a

also

deposit

provides

if

that

directly by a guarantee

or other

depository

or

institution

affiliate's assets,
obligation
maturity

are

of

affiliate's
affiliate's

a

the

deposit

reliance

on

the

established

institution.
to

lend

credit

For

money

be

these

institution enables the affiliate
depository

by

to

is

supported

supporing

the

the proceeds

of

depository

would

obligation. Under

a f f i l i a t e ’s

conditional liability of the

indirectly

to

an

obligation

regardless of whether

channeled

such

that

the

institution.
maturity

circumstances,
support

to operate

example,

of

of

The
the

the

the depository

as an arm of the

affiliates

customers

of

the

the

have

been

depository

institution with the affiliate relying on a letter of credit or

8-

-

other form of credit support

from the depository institution to

back

or

the

affiliate's

arrangements,
depository

while

loans
not

institution,

market

obligations.

directly

channeling

use

creditworthiness

the

depository institution to circumvent

These

funds

to
of

the
the

the need to fund assets on

the books of the depository itself with reservable liabilities.
3.
"deposit"
where

Currently,

does not

the

assets

depository

under

include
are

the

for

against
the

assets
a

any loss

on

the

without

third

party

term

recourse
and

the

to reimburse

the

the Board would not consider

assets.

or

Under

such an arrangement

the claims under the guarantee

to or arising out of the assets sold could be made

the depository

institution

third party guarantor.

benefits

of

is obligated

to give rise to a deposit unless
or relating

interpretations,

by

in turn,

third party

the proposal,

a sale

guaranteed

institution,

indemnify

staff

of

excepting

The Board

such

definition of deposit and

as well as,

or

instead of,

solicits comment on

indirect

obligations

the potential

for

from

abuse

of

the

the

such

an

exception.
4.

The Board also proposes

"affiliate"
does

not

in Regulation D

meet

the

Regulation D but
depository
have

function

definition

into

For

in,

to

or to place
fund

institution.
organization
obligation of
include
amending

such
the

loans

in

the

depository

to

backed

the depository
transactions

in

definition

of

current

whose

sole

such as commercial paper

or

to finance the acquisition of

customers

by

that

institutions

organizations

long-term nonreservable

In such a case,
are

organization

functions as an arm of the

with

in order

any

"affiliate"

example,

is to issue obligations,

from,

or

of

transactions

collaterized securities,
assets

include

that nevertheless

institution.

entered

to

to amend the definition of

of,

the

time deposits

depository

the assets or liabilities of the
a

letter

of

institution.
the

credit
The

definition

"affiliate"

in

or

other

proposal

of

would

"deposit"

Regulation D

by

9-

-

specifically to include these

"captive" organizations which are

effectively managed by or

under

institution

formed

or

that

are

the control of the depository

transactions with

the depository

even

formally

though

not

to

engage

primarily

institution

affiliated

or

under

its

the

in

customers

current

definition.
Measuring maturities on d e p o s i t s .
If a liability is a deposit
Regulation D,
determine

its

whether

deposit,

and

maturity

is

accounts

are

less

is

than

a

and

to a

established
account

in

order

or

a

time deposit,

one-half

twelve

section 204.2(a)

years.

percent

have

a three

time deposits with

reserve

defined

in Regulation D,

The

reserve

whether

although

the

requirement

the Board proposes

to determine

remaining maturity of the
effectively

shortened

guarantee.

For

by

example,

assets
the
an

and

a zero

is

related

With

nature

unless
of

obligation

in

respect

transactions,

the maturity by looking
sold

not

is addressed,

to obligations of affiliates.

of a sale of assets

than one

have

"maturity"

issue

its

requirement.

maturity

term

to

Transaction

reserve

a longer

requirement.

with respect

percent

of

time

time deposits with maturities of less

years

to the proceeds

be

transaction

one

percent

part,

must

is a nonpersonal

subject

one-half

Nonpersonal

it

if it

and nonpersonal
and

maturity

under

to the

the maturity

the

assets

calling

for

or

is

the

amortized

repayments of principal could be treated as a multiple maturity
time deposit with each portion of the principal having

its own

maturity date established by the required date of repayment.
With
considering
depositor
in

any

viewing

or a

be

to

underlying

any

provision

"call"

principal

setting
could

regard

exercised.
also

at

prior
the

may

require

disburse

funds prior

to

the

earliest

Provisions

deposits

allowing

by the depository

payment

that maturity

guarantees,

the

in

a

the
"put"

institution
original
time

these

the

and

depository

Board
by

the

resulting

maturity
put

other

or

as

call

types

institution

to the original maturity date.

is

of

to

The Board

-

prefers

to

clauses

(such

outside

the control

affecting
this

allow

the

as

parties

events

clauses.

is

The

of

to

include

default,

of

the

deciding

Board

requests

are

comment

One

unexpected), guarantees

full or partial),

escrow accounts,

with

issue

the

including,

not

difficulty

on

other

(expected and

events

acceleration

for determining maturity
but

and

"usual"

appropriate method
transactions

acceleration

in the obligation without

deposit.

what

usual

prepayments,

of the parties)

the maturity

approach

10 -

of

in asset sales

limited

to,

funds,

and

prepayments

against default

sinking

the

(whether

accruals,

and

put and call options.
Regulatory Flexibility Analysis
The

Regulatory

requires the Board
small entities.
the

proposal

Flexibility

to consider

In

would

this
not

regard,
impose

recordkeeping requirements.
request
may

be

comment

on

any

preferable

Regulation

D set

to

(5 USC 601

impact of

it

any

is

et

s e q .)

this proposal on

the Board's

additional

view

reporting

The purpose of this proposal

alternatives

the

out

the

Act

Board's

below.

that

the public

proposed

Suggested

or
is to

believes

amendment

alternatives

that

of
will

its
be

considered when comments are analyzed.

The proposed rule would

apply

It

to all depository

institutions.

that the proposal will have a negative

is not

anticipated

impact on the ability of

small depository institutions to attract deposits.
List of Subjects in 12 CFR Part 204
Banks,

banking?

Federal

Reserve

System?

Foreign

banking.
Pursuant
Federal

Reserve

to its

Act

amend Regulation D

(12

authority

under

USC 461(a)),

section

the

Board

19(a)

of

proposes

the
to

(12 CFR Part 204) as follows:

1.

The authority citation

for 12 CFR Part 204 would

continue to read:
AUTHORITY:
Act

(12 USC 461,

Secs.

601,

Banking Act of 1978

19,

611)?

25,
and

25(a)
sec.

of the Federal

7 of

the

Reserve

International

(12 USC 3105), unless otherwise noted.

-

2.

11 -

Section 204.2 would be revised to reads

§ 204.2 Definitions.
For

purposes

of this

part,

the

following

definitions

apply unless otherwise specified:
(a)(1)

"Deposit" means:

*

*

(v)
affiliate

Any

that

promissory

*

is not

note,

*

liability

itself

of

a

depository

a depository

acknowledgment

similar obligation

*

of

institution

advance,

due

institution's
on

bill,

or

(written or o r a l ) , with a maturity of less

than one and one-half years,

except any such obligation

had

by

it been

any

issued

directly

the

would not constitute a deposit.

depository

that,

institution,

Such a liability

includes any

affiliate's liability:
(A)

The

proceeds

maintain

the

capital)

to

such

of

which

availability
the

obligation

of

depository
issued

depository

institution

institution

retains

obligated

are

directly

to supply

funds

(other

institution,

to purchase
where

no
or

used

interest

to

than

except

assets

the

or

any

from

the

depository

in

conditionally

and
on

is
the

not
assets

sold; or
(B)

The proceeds of which

maintain

are not

the availability of

used

funds

to supply or

to the depository

institution but that is supported by an obligation

of

the depository institution,

regardless of whether such

obligation

unconditional,

complete,

is conditional,
partial,

obligation
backing

the

directly

or
(as

affiliate's

supports
with

a

the

supporting the affiliate's assets.

affiliate's

letter

liability)

or

contingent,

of

credit

indirectly

by

-

12 -

If a liability of an affiliate of a depository

institution

is

regarded as a deposit because the proceeds are used to purchase
assets
the

from

the

deposit

obligation

be

the

shorter

issued

or

the

remaining

If a liability

because

depository
purchase

institution,

shall

purchased.
deposit

depository

it

is

from

an

and
the

the

the

the maturity

maturity

maturity

affiliate

supported

institution

assets

of

of

then

by

an

the

the

assets

is regarded

obligation

proceeds

depository

of

of

are

of

as

of

a

the

not

used

to

institution,

then

the

maturity of the deposit shall be the maturity of the obligation
of

the

affiliate.

If

the

proceeds

from

an

affiliate's

obligation are placed in the depository institution
of a reservable deposit,

then no reserves

in the form

are required on

obligation of the affiliate because reserves are required
maintained

against

institution,
shorter

of

but

the

the

deposit

maturity

the maturity

of

issued

of

the

the

by

the

deposit

affiliate's

the
to be

depository
shall

be

obligation

the

or

the

maturity of the deposit itself?
(vi) Credit balances?
(vii) Any liability of a depository institution on any
promissory

note,

acknowledgment

acceptance,

or similar

of

obligation

advance,

(written or oral),

mortgage-backed bonds and borrowings

in

assets where the depository institution
or

is

liable

liability

for

the

retained

is

assets

or

borrowing

institution
income,

is

as

except

a

provided

issued
means

any

sold

such

or
of

the

form of

retains

(whether

conditional,

complete, or partial),

bankers'

an

the

interest

obtaining

liability,

funds

a

of
in

or

contingent,

that the liability,
by

sales

interest

unconditional,

undertaken

including

obligation,

depository

other

obligation,

than

or

fee

borrowing

that:
(A)

Is issued or undertaken and held

(1)

An office located

for

the account

of:

depository

institution,

foreign

in the United States of another
bank,

corporation, or New York Investment

Edge

or

agreement

(Article XII) Company?

13 -

-

(2)

The

United

States

government

or

an

agency

thereof? or

Minbanc

(3)The

Export-Import

Capital

Corporation,

for Puerto Rico,
Bank,

or

the

a Federal

National

Bank
the

of

the

Government

Reserve Bank,

Credit

United

Union

States,

Development

a Federal

Bank

Home

Administration

Loan

Central

Liquidity Facility?
(B)

Arises

or obligations
interest by,

from a transfer

that are

fully

of direct obligations

guaranteed

as

to principal

of,
and

the United States Government or any agency thereof

that the depository institution is obligated to repurchase?
(C)Is
subordinated

not
to

insured

the

claims

by

a

Federal

of

depositors,

average maturity of seven years or more,
capital by its primary Federal

agency,
has

is

a

weighted

is considered

supervisor,

and

is

issued by a

depository institution with the approval of, or under
and regulations of,
(D)
institution
of

Reserve

Arises

of

Bank

a

or

from

a

of

the

loan

by

in securities,

transfer

other

borrowing

of

deposit

immediately

referred to as “Federal funds"),
date

the rules

its primary Federal supervisor?

from a dealer

proceeds

to be

in connection

a

depository

for one business

credit

available

in

a

funds

day,

Federal
(commonly

received by such dealer on the
with

clearance

of

securities

transactions ?
(E)

Arises

from the creation,

discount and subsequent

sale by a depository institution of its bankers'
the type described
Reserve Act

7 of section 13 of the Federal

(12 U.S.C. 372)?

(F)
depository

in paragraph

acceptance of

Arises from a sale of assets

institution

that are held by the

for a short period of

time

the depository institution's ordinary underwriting,

as part

of

trading,

or

private placement activities?
(G)
institution

Arises from a sale of assets where the depository
is liable only for a specified portion or share

in

-

14 -

any losses that arise from individual assets sold as the losses
are

realized,

provided

the depository

institution's

liability

does not exceed 75 percent of any losses; or
(H)

Arises

from a sale of assets:

(1^) where a third

party is directly liable on the assets sold;

(2 )

the depository

institution's only obligation

is to indemnify the

third

guarantor;

under

relating

and

(3^) the claims

or arising out of the assets

the guarantee

sold cannot be made

party

against

to

the

depository institution by the purchaser of the assets.

*

(2)

*

(ii)
an

item

transaction
for

*

*

An obligation,

in the

conditional,

incurred

*

*

"Deposit" does not include:

*

on

*

process

contingent,

the

as

an endorser's

collection,

that

liability

represents

or endorser's liability arising

primary

purpose

of obtaining

*

"Affiliate"

*

from a
is not

or maintaining

*

includes

any

corporation,

or other organization:

Which

*

the

*

*

depository

manages or controls, directly or

*

institution

indirectly,

effectively

or which is formed

for the purpose of engaging primarily in transactions with
depository

a

(other than fee i ncome).

*

*

(5)

*

in the ordinary course of business and that

*

association,

such

of

the availability of funds

(q)

*

institution

or

its

customers

even

if

such

the

-

organization

is

not

15 -

formally

owned

or

controlled

by

the

depository institution,

*

By

order

of

*

the

*

Board

*

of

*

Governors

of

the

Reserve System, April 30, 1986,

(signed) William W. Wiles
William W. Wiles
Secretary of the Board

Federal